Secondary office market shows Sydney strength: The three numbers to know
Smaller suites in secondary building assets are seeing solid demand, according to Ray White Commercial.
Noting the Sydney CBD strata market has been a strong performer in the total CBD office rental market, head of research for Ray White Commercial Vanessa Rader, said that Sydney CBD’s strata market is approximately 10% of the total market.
Gross face rents achieved for smaller office suites across the CBD averaged $579 per square metre as of March 2014. This is 2.65% up on 2013’s face rent achieved.
“This is a better result than the prime office market which currently averages $778 per square metre, a 1.89% increase on the previous 12 months,” said Rader.
The prime CBD office market has dramatically different incentive levels from the secondary market.
“The secondary market has a far more variable incentive structure which varies depending on lease size, term, quality and lease type,” she said.
THREE MUST KNOW FIGURES – VACANCY RATES
- D-Grade stock: 6.7%
- C-Grade stock: 7.8%
- Average: 9.0%
Source: Ray White
“Incentives can range from as low as 5% to as high as more than 35% (for sublease space), shown as a combination of fit out and rent free periods,” she said.
“Quality small suites in attractive, modern assets continue to the highly sought after by small businesses and can be somewhat sheltered from high incentive levels offered in the prime market and achieve strong effective rental rates.”
Currently, D grade office assets are the best performing for occupancy in the CBD – with the vacancy rate at just 6.7%. The C grade assets are recorded a 7.8% vacancy rate.
“This result when compared to the total Sydney CBD vacancy rate of 9.0% demonstrates the ongoing, solid demand for smaller suites in these secondary assets,” she said.
“These assets also showed the greatest six monthly absorption rate of all quality grades, with a total absorption of 10,873 square metre.”